Is Globalization Really Fueling Populism?

The prevailing explanation for the surge of populism in Europe and the US is that the "losers of globalization" are rebelling against the establishment that embraced trade liberalization. But the available data do not bear this out.

BRUSSELS – On both sides of the Atlantic, populism of the left and the right is on the rise. Its most visible standard-bearer in the United States is Donald Trump, the Republican Party’s presumptive presidential nominee. In Europe, there are many strands – from Spain’s leftist Podemos party to France’s right-wing National Front – but all share the same opposition to centrist parties, and to the establishment in general. What accounts for voters’ growing revolt against the status quo?

The prevailing explanation is that rising populism amounts to a rebellion by “globalization’s losers.” By pursuing successive rounds of trade liberalization, the logic goes, leaders in the US and Europe “hollowed out” the domestic manufacturing base, reducing the availability of high-paying jobs for low-skill workers, who now have to choose between protracted unemployment and menial service-sector jobs. Fed up, those workers are now supposedly rejecting establishment parties for having spearheaded this “elite project.”

This explanation might seem compelling at first. It is true, after all, that globalization has fundamentally transformed economies, sending low-skill jobs to the developing world – a point that populist figures never tire of highlighting.

Daniel Gros is Director of the Brussels-based Center for European Policy Studies. He has worked for the International Monetary Fund, and served as an economic adviser to the European Commission, the European Parliament, and the French prime minister and finance minister. He is the editor of Economie Internationale and International Finance.

The Republican Party’s likely presidential candidate is a racist, misogynistic xenophobe. Many Americans and others – not to mention Republican leaders – may be horrified, but Donald Trump has merely brought to the US a political style developed in Europe and perfected in Russia.

An to be clear, I don't think globalization is fueling Populism. It is abused by Populism using it to advance their cause. To be in the defensive is not a good position . And I think using euphemism (populism) for something that ugly in PS might help normalize it.

Also, to say that educated workers earn much higher incomes than less educated workers is to fail to see the truth behind that stat. Wage premium for educated workers is larger in the US than in Europe because of the lack of any restrain to CEO salaries and bonuses, that affect the average data. What it points to is a much larger income inequality, not higher education is more valuable in American's labor market. Grads and Post Grads working as unpaid interns won't be featured in that stat.

The argument about the share of low skill workers vs. the share of university graduates in the workforce is grossing over the fact that too many university graduates are working temporary, precarious, low paying jobs that don't pay rent. in effect, they are university graduates that work low skill jobs. Where should they sit in this argument?

I don't understand. The share of the low-skiled in the work force is shrinking which seems to indicate low-skilled people are having problems finding work to begin with. Doesn't that further support the thesis that the losers of globalization are fueling the backlash? And the fact there has been a time lag between the beginning of the end for low skilled workers and the push against mainstream politics doesn't prove there is no connection. The decrease in the life chances of the low skilled is a necessary, but not sufficient factor, in creating this new political context.

i think the rise of populism is multi faceted,not only in America But also in Europe the main parties are in bed with the very institutions that brought capitalism to its knees and then let them off lightly and have barely changed the situation regarding the bonus culture,regulators and credit agencies going native and actually working in the financial institutions interests rather than those of the public and shareholders most of which can be attributed to effective lobbying.All of which has passed on the cost of the crisis to the public
Another reason is the Iraq war and the history of shocking military interventions going back 60 or more years.Add in the increasing power of the surveillance state and many more besides gives plenty of reason to be dissatisfied by the usual two party narrative although the facts on the ground will naturally differ by area

the IMF also calls for the use of tax credits for much more workers to give an incentive to work.I may have missed something but i would hardly call the IMF a hard left group although they are on the left of the rest of the troika

it could be that more low skilled workers are actually out of work or are having wages suppressed by the influx of labour that big buisiness and the IMF call for.Another reason for growing discontent is the rapid rise of the working poor or those on zero hours contracts

The issue with this argument is that it takes a narrow view of globalization and a narrow view of populist discontent. It reduces both to economic issues of unemployment rates and wages. As a community college student taking classes like 'anarchy and anthropology' and 'food and politics', I can tell you that as much of the political discontent is about an unjust political-economic system as much as it is about personal economics. A couple of examples - a recent article in the economist writes, "The naughty secret of American firms is that life at home is much easier: their returns on equity are 40% higher in the US than they are abroad. Aggregate domestic profits are at near-record levels relative to GDP. America is meant to be a temple of free enterprise. It isn't... A very profitable American firms has an 80% chance of being that way ten years later. In the 1990's the odds were only about 50%... The tax system encourages them to park profits abroad... Were America's firms to cut prices so that their profits were at historically normal levels, consumer's bills might be 2% lower... 2/3 of the economy's 900 odd industries have become more concentrated since 1997. A tenth of the economy is at the mercy of a handful of firms - from dog food and batteries to airlines, telecoms and credit cards. A $10 trillion wave of mergers has raised levels of concentration further... Lobbying spending has risen by a third in the past decade, to $3billion. A mastery of patent rules has become essential in health care and tech, America's two most profitable industries. And new regulations do not just fence big banks in: they keep rivals out... The ability of large firms to enter new markets and take on lazy incumbents has been muted..." And this is just using the author's focus on economic issues (not even talking about inequality and globalization). I know tons of people that are frustrated by America overdrawing water reserves from the Ogallala to support agricultural exports to the rest of the world - now I think this style of begger-thy-neighbor protectionism is stupid, but it's still a globalization based concern for many. And then their is the issue of cultural identity or cultural dignity. For example, the united Arab voice/identity brought about by the proliferation of satellite tv and Al Jazeera helped inflame populist discontent in the Arab Spring. Then there's the issues of migration into Europe and poor cultural integration - the rapid international movement of peoples is unquestionably and issue of globalization. Just because a single framing of discontent related to globalization isn't correct doesn't mean that globalization isn't spurring discontent.

'The Globalization & Development Reader' writes about the political Trilema of the global economy. In absolutes, the world can only have two of the following three options - nation-states, globalization, and democracy. If we pick nation-states and democracy then we get the Bretton Woods Compromise, if we pick globalization and nation-states then we get Friedman's Golden Straight Jacket, or if we pick democracy and globalization we get global governance. The author writes, " We can restrict democracy in the interest of minimizing international transaction costs, disregarding the economic and social whiplash that the global economy occasionally produces. We can limit globalization, in the hope of building democratic legitimacy at home. Or we can globalize democracy, at the cost of national sovereignty." I couldn't agree more with this framework.

thanks Jacob Alhadeff. But forget about any incendiary article on PS.. seen any article in favor of Brexit?? I haven't... not that that I care much, I am not from there, but it just gives you an idea on how about 50% of the brits are despised. So forget about an article the points at the firm concentration, the end of the atomised market, the powerlessness felt by the poeple who don't own an inch of the tools they work with, nor a say on the economic system. Forget about a pamphlet pointing at the dozens of violation of democratic principles by the EU.
But if you want to hear Junker, the master-chief of the EU tax evasion thy-you-neighbor scheme who now is the head of the EU commission, come here and be lectured how voting for "populist" is such a shame.
Jean-Claude Junker alone is a good enough reason to vote for extreme right or extreme left and set the house on fire !!! By the way, the Luxleak whistleblowers are not on trial. Anybody caring for justice should sign the petition to support antoine deltour on change dot org.

No doubt varied reasons for the rise of Populism, and they likely differ by country. Globalization being one of the reasons. Trade agreements are an outgrowth of globalization and the long run effects should be good for all parties if the agreements are balanced. Where they fail is to ignore the short run labor disruptions and prepare the labor for new skills and employment. That's somewhat understandable as the mention of lost jobs would kill support for the deal. Ignoring that element just kicks the can down the road, which may be where we are today.

Economic theory supports trade, free trade. However the theory assumes free markets. There are few free markets in existence, even fewer internationally. Don't expect trade and globalization to benefit the population equally or even fairly when government and business are linked together as in the USA. The result is a widening wealth and income gap which is likely the principal cause of Populism in the USA.

Daniel Gros maintains that it is "not just simplistic" but also "misleading" to believe that globalisation is "really fueling populism." While freer movement of goods, capital, services, labour, technology etc has "transformed economies," its victims, the so-called “losers of globalization” see it as a thorn in their side, driving them into the arms of "potentially dangerous political forces." Populists blame the establishment parties for an anaemic economy, saying globalisation has sent "low-skill jobs to the developing world," and taken a toll on domestic employment. They reject this "elite project" and demand for protectionist and inward-looking measures.
While Donald Trump is America's "standard bearer" of populism, France's Marine Le Pen is widely seen as his European equivalent. Trump doesn't seem to object to globalisation. He is a self-proclaimed "free-trader" himself. But he says he has a problem with free trade in the absence of talented negotiators. He said: "Free trade can be wonderful if you have smart people, but we have people that are stupid. We have people that aren't smart. And we have people that are controlled by special interests. And it's just not going to work." His policy would be "America first" and his "people" would be tough negotiators and play a zero-sum game.
Le Pen had once said that she faced two dangers - Islamic fundamentalism - a kind of totalitarianism in the 21st Century. The second is globalisation, seeing "trade liberalization" as another kind of totalitarianism, the ideology of free business with no boundaries. She does believe that "leaders in the US and Europe “hollowed out” the domestic manufacturing base, reducing the availability of high-paying jobs for low-skill workers, who now have to choose between protracted unemployment and menial service-sector jobs."
Although educated people are "on average, three times as likely to have a job," and can earn more than those who are "less-educated," young university graduates in Southern Europe complain about high unemployment and often share the same plight as "those without a secondary education." In the absence of job opportunities, Southern Europe sees a "brain drain" of its young and talented leaving for northern EU member states. Other young and jobless, who stay behind, miss out on gaining economic independence and confidence that come with steady employment. Some have to postpone their plans for families and pensions etc.
This economic malaise does "account for the rise of populism." Yet the author is reluctant to admit that the assupmption of "low-skill workers’ circumstances and prospects deteriorating faster vis-à-vis their high-skill counterparts" is also real in Europe, not just in America. They are the ones who support fringe parties on the far left or right. Even if it is true that "educational attainment correlates strongly with income and labor-market performance," and that "higher education has provided significant labor-market advantages for a long time," the sense of insecurity still prevails among those, who are qualified and employed, especially when economic times are tough.
The Euro crisis and the Greek bailout drama had enabled the rise of populism in Europe. In Southern Europe the "economic arguments" of populists are "simplistic" - globalisation and immigrants have become scapegoats for their grievances. Populist parties elsewhere in Europe jump on the bandwagon and hijack the refugee crisis to boost their political strength.
Indeed, it is important to know that globalisation is not a phenomenon of yesterday. For three decades it had helped boost the global economy, which has its cyclic ups and downs. However populism is an opportunistic movement, which is all about targting the perceived interests of ordinary people at the right moment, and winning their support.

There was a certain philosophy of economics that basically took off with Reagon and Thatcher and is immortalized in the Gordon Gecko quote that "Greed is good". This philosophy puts deep trust in markets to serve the greater good. And this trust by the public was strong until 2008 when the scab was pulled off and the wound underneath was found to be rotten to the bone. Markets don't serve the greater good, they serve the top 0.1% who own the biggest corporations (and the economists who largely serve the institutions they own or sponsor). But the public is not so stupid. They know they have been duped. So they voted in Obama to make change happen - and somehow he was too weak. So this time they are looking for a man of action. Use of the word 'populist' is not accurate or constructive. Trump is an brutal syptom to a problem that mainstream politicians and economists simply deny is a problem - which is why they were so easily blind sided by his crushing of the 'chosen' candidates'. Even if Hillary wins this economic philosophy has reached its sell by date, and someone even more 'populist' will fill the void. The underlying issue has to be resolved, and this issue is the baby of mainstream economics and politics.

It is not globalization what fuels populism.
It is our inadequate response to globalization that does it.

We still seem to think that "globalization" means markets, financial institutions and corporations and that it is man-made.
But "globalization" is not man-made, it is an evolutionary state of humanity that is part of our inevitable, ongoing evolutionary development.

Contrary to our popular belief we are not outside or above the cosmic natural system we evolved from. We are still very much within that system affected by its evolutionary flow and all of its basic laws.
This cosmic natural system is fully integrated from its smallest particles to its largest astrological bodies, all comprising elements taking part in a mutually complementing cooperation. Without such cooperation no life or optimal development would be possible.

Within this fully integrated and balanced system, making constant adjustments to keep homeostasis humanity has been building an artificial bubble based on man-made laws and illusions.
And even today when it became clear we evolved into such intricately interconnected system where each of us depends on everybody else we still try to stubbornly pursue our proud human dreams, foolishly believing we can change and rule the system we exist in.

People turn to clowns, comedians and populists of all kinds because they see that the "mainstream" leaders have no idea how to resolve the paradox in between our false human system and the natural system pressing us from around, demanding our integration.
Of course the populists will have no answers either but people have become desperate seeing how we are sleepwalking towards a global meltdown on all fronts and without proper "education" they still think different "leaders", "experts" will have answers.

The only true solution would be making global human society adapt to the vast system around us, accepting its laws safeguarding balance and homeostasis. That requires a fully integrated human society in a way that each person and nation could preserve their unique characteristics, talents but still they would mutually contribute to the optimal existence, well-being of the whole human "super-organism" as cells and organs of a single body.

In fact since we are but a very small part of the vast cosmic system we have no free choice in this adaptation, our free choice is only in the manner of this change.
Do we make the necessary, fundamental changes in our interconnections, reaching the inevitable integration willingly, proactively, understanding the system and its requirements, or we change forced by blows and unprecedented suffering?

Globalization is creating opportunities on a scale that hitherto was unimaginable.
China's Investments in Real Estate in Australia Britain Canada and America is doubling every year - nearly 25 bn in Australia alone in 2015.
Instead of European Union playing to win from Globalization, the Author is simply reiterating coordination "that stacks the cards".
Global Financial Institutions - politically dominated by Europe - have run out of steam in their "capacities to stack the cards".
China comprehended the limitations of Global Financial Institutions by 1978 - and has created the supplemental Institutions that overcame.
China is not India - never was, never will be.

European capacity to win in a changed global predicament - requires retooling.
The author instead of lamenting like "losers of globalization" - needs to reassess its cards, and play like The Anglosphere.
Attracting 100 billion in Real Estate is just one frontier. Many more have happened due globalization.
Politically attempting to "stack the cards" reflects loser mentality.

Time to look inwards and find the assets it has - to make the geography attractive, a geography that is a magnet.
Exporting migrants perennially is for the Third World, yet the Europe that EU has manufactured remains an endless supplier.
Blaming Britain and America and now China and India, is not First World Europe is capable of becoming once again.
Without the mindset that has shackled it - carping like losers, and politically jockeying to "stack the cards" to win.

Globalization is indeed fueling populism. If it is economic arguments in the Southen euro zone, it is arguments against people integration in the economically better of North, including in the United Kingdom.

A few years ago economist Paul Krugman and some others were saying that there are choices in economic policy, and that Europe had decided to put more value on social bonds and equality than on growth and prosperity. How has that been working out? What with higher structural unemployment than in the USA, and stagnation eurosclerosis since the 1970s. (Noting also that the European Commission was captured years ago by elites who think in terms of regulation and collective action, and have little respect for individual choices.)
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In both America and Europe policy is being set by 'all-wise' elites and imposed on the rest of the people, without getting their buy-in. Therefore no surprise that we see rebellion.

What's driving populism, is lower incomes and a lousy economy. Immigration and globalization are where many voters are misplacing their anger, because it's always easier to blame others and outsiders for problems a country has created for itself. And countries have created this problem by voting for more government: a government that will provide goodies to voters, and which must first take it from voters to do so.

Nothing is more correlated to prosperity than freedom. Which means less government spending, less regulation, and less taxation. And instead of politicians picking winners/losers in commerce, we'd have free markets, property rights and the common law to resolve disputes rather than a political economy controlled via legislation, regulation, litigation and the permit process.

And government welfare isn't giving each other freedom; instead, it turns the purpose of government on its head, harming people (by taking their money) for the benefit of some. Rather than protecting people from those that would harm them, including those that would harm them by having a vote to take their money for the poor.

Curtis, it is not "who's freedom" but rather "what freedom". Laws that were passed in the last 3-4 years in the US, EU and elsewhere do not limit only "freedom" but has taken all populations back to the slavery age and guess who caused it?

This is just a grand denial of a failed policy in the West - that of passively enabling corporations to eviscerate native economic activity in search of short term profit yield. At its heart appears to be the soft message that the voter is stupid or misinformed and democracy therefore gives the wrong results, presumably because it doesnt fit with some overview. The voter may be stupid or misinformed but they know what is going on in their pocket, any idiot does.

Just one red flag - Things have ramped into the ground so much that currently private equity firms KKR, Blackstone Group, Oaktree Capital, Carlyle Group, and Apollo Global Management.sitting on in excess of 200billion USD saying they cannot see any opportunity to invest it anywhere. For that to happen in a consumer society it means the consumer is impoverished. Another flag - consumer expenditure of food as proportion of disposable income is growing. How could this be, could it be their income has declined in real terms. That has nothing to do with offshoring I suppose

'The final nail in the coffin of the globalization-based explanation for the rise of populism in Europe is the fact that the share of low-skill workers (who have not completed a secondary education) is declining rapidly' DG

Excuse me but what has that got to do with the McJobs many graduates find they are now doing. Or if you want another example how did the phenomena of graduates seeking professional work experience having to do internships for nothing or even pay to do so arise. Nothing to do with a shortage of suitable graduate jobs?

At the end of the day, perhaps the turn to the right in the West should be put down simply to a global surplus of labor?

The corporatocracy simply exploits the surplus and does its best to make sure that the one agency that might check its excesses -- the people's government -- is bought off (the expense being taken as just another a cost of doing business).

I can't speak to the accuracy of your refutation of the "prevailing explanation" of rising populism in the European context, but it misses the mark for the US. You provide an economic analysis for why a political and social reaction cannot be taken place. It is an argument that would prove the French Revolution could not have happened if conditions in France were improving in the year or two before the Bastille. In the US, the populism has been a growing force since the Great Recession and the growing perception that the government and political parties acting to protect the wealthy/finance community rather than ordinary folks who were losing their houses. The focus on globalization has been picked up by loud political voices which have had impact in communities with few jobs, high level of addition and substantial poverty.

You state: "But if these factors account for the rise of populism, they must have somehow intensified in the last few years, with low-skill workers’ circumstances and prospects deteriorating faster vis-à-vis their high-skill counterparts. And that simply is not the case, especially in Europe." That is simply not true. They need not have intensified as a factual matter. What was required was that they be noticed and acted upon politically.

I totally agree. There are many reasons for the rise of populism. But if I have to pick one on the top of the list, it will be, by far, corruption.
Sincé the late 90's, corruption is rising all over the world. Maybe because of globalisation, maybe because it is posible to send money to a safe haven with just on click.
When those losers of globalisation as you refer compare their problems with the easy money that politics and oligarchs are gaining, they just burst of anger.
In the western hemisphere, that corruption is rising, but up to some points, it is not so systemic as in other countries. Also, the wellfare state mitigates the impact.
That's why corruption is only fueling populisms in tje western hemisphere. In other parts of the world, where regimes are no more than a mafia-style kleptocracy, corruption is fueling violent extremism.
But for some "strange" reason, corruption is never in the list... and I can guess why.

I may suggest that corruption may be an expression of the lack of sovereignty on the globalized corporations. Its messy to formulate laws that apply beyond national borders. Mostly, national governments are reduced to play by the book of global corporations.

"If these factors account for the rise of populism, they must have somehow intensified in the last few years, with low-skill workers’ circumstances and prospects deteriorating faster vis-à-vis their high-skill counterparts."

In the US, this was true between roughly 2007 and 2013, according to the Federal Reserve's survey of consumer finances (with 2013 data, published in 2014, being the most recent available). And indeed, the US had the OWS movement on the left and the Tea Party movement on the right soon after the financial crisis. This election cycle we are seeing a continuation of that, as political awareness is taking time to grow.

My take (or is it merely my personal attitude?) is that populism is the result of long-matured resentment at the purchase/control of governance by big-money (oligarchy/plutocracy/TheEstablishment) qalso known as corruption. At least, the left-wing populism is. The right-wing seems to be the result of careful "teaching" whereby poor folks are taught to hate/fear "the other" (blacks, immigrants, Muslims, Mexicans, "terrorists-not-on-OUR-side")

Where do you get this 'low skilled' limitation re globalisation. I am sure that Beoings Seattle based aircraft workers - 8000 redundancies whilst Beoing relocates activity to China will be delighted to be told they are low skilled as well as losing their jobs

'When you combine ignorance and leverage, you get some pretty interesting results'. Warren Buffett

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